Black Swans
I’m Shocked
The 9.0 earthquake that devastated northern Japan continues to have severe aftershocks. They are shocks in what clever physicist would ascribe to a type of space-time. It’s not about Star Trek stuff, or the time travel that fantasies love to use, but rather how one type of event starts a whole series of other events along a different type of path, affecting a different space at a different time, but connected. These types of other events are very real “butterfly effects” where a small change in one place can cause a whole bunch of changes downstream. Believe it or not, that earthquake has changed our lives, our businesses, and our collective futures. Toyota, the world’s largest automaker is expecting a 35% drop in profits, primarily from supply chain disruptions. Maybe that’s a no brainer, but it’s also driving severe supply chain effects globally and very real adverse economic and employment pain here in the US. From automakers and their suppliers, to many of the stuff we buy including our beloved electro-gadgetry … it’s still hurting.
How many of our business plans had “the earthquake” included as a scenario? Not very likely … Our nuclear industry was in the early days of a beautiful renaissance, one with a promise that would be a large driver of untethering us from our OPEC masters … but it too has been severely damaged by an aftershock … but one with no Richter scale. Disruptive events aren’t what they used to be. Historically, disruptive events were contained to the extent of our technological and logistical isolation …. We weren’t all networked. Globalization has changed that … we’re one big interdependent and interconnected family. The apparent and marketed successes of globalized supply chains and very sensitive “just in time” systems had a big Black Swan lurking … behind our chosen lines of sight.
Today, complexity has become a global behemoth, creating new rules of business and generating many more choices and opportunities for innovation and value creation. I certainly love my Android phone more than the beeper I had 30 years ago. For businesses, that complexity requires a severe filtering of what is included in planning and consequently what we chose to be blind to. Planning in business love the optimists and sometimes ostracize the pessimists … the ones who ask the unnerving questions.
Given Japan’s location, how likely are earthquakes? I heard an unfortunate comment from a nuclear industry spokesperson … unfortunate because it is an industry I love and believe in … that “the damage at the Fukishima plant was not from earthquake damage … but rather from the tsunami, it performed as designed.” Aren’t earthquakes and tsunamis connected?
Today’s world is much less dominated by trends and easy predictions … how many surprises have we had to respond to in our enterprises? My bet is that we’ve had more of them more frequently … in some multiple of our increasing interconnected interdependency. Take a look back and count them … what would we have done if we had known or prepared ahead of time? As we look ahead and build our planning and business models for the coming year … are we asking the right questions? How many levels of “what if” along our interconnectivity are we exploring? Have the aftershocks created more timidity in decision making? How much time do we invest in complexity driven failure modes versus “win” and “capture” plans. Do our business continuity plans address the really scary stuff?
There is opportunity in every storm, after all, “Luck is when preparation meets opportunity.” Seneca, Roman philosopher, mid first century AD.
Getting the Point
The Macedonian Phalanx was a battlefield formation developed by King Philip, father of Alexander the Great. It was the most effective military ground weapon to meet enemy forces head on, enabling attack by cavalry and other forces along the flanks. It utilized collapsible long spears and was virtually undefeatable for over 300 years. It combined the interlocking and cohesion of shields and the long reach of the spear. The units were well trained. It was a marvelous combination of strategy, technology, resources, process and, execution. Sounds like a phrase of a business book. The phalanx had worked so well, that it changed very little strategically until the Battle of Pydna in 186 BC when Roman Legions massacred the Macedonians. The Romans also combined strategy, technology, resources, process, and execution. There is one contrasting difference, the phalanx was a weapon built on rigidity, and these Roman legions applied agility against their enemy. The phalanx was vulnerable on uneven ground, the flanks and rear and was next to useless close up. The Roman gladius was the epitome of a close battle weapon, a breakthrough technology, one that moved from bronze and iron to forged steel.
The Macedonians experienced a disruption in their capability; they did not decay battle by battle. Content with the phalanx, they continued to make it better, each day, and becoming less likely to win against the Romans. They suddenly discovered and dearly paid the Cost of Unreadiness. Over the last few years evidence of the Cost of Unreadiness has been unavoidable. We saw it in the recession triggered by the meltdown, to the ravages of earthquakes and tsunamis, lagging or no capability in response to Katrina, incompetence with the oil spill; there are plenty to consider.
So, there is such a category of cost and it can be so high that it can be terminal, life ending, for humans or businesses. This cost is part of a family of costs we don’t measure, but we experience. We budget for them, but not explicitly, rather they are buried in our standards and estimates, processes, and plans. Traditionally, Lean has sought to reduce the costs of imbedded waste, Six Sigma attacking the costs from unwanted variation. In our current environment, full of complex systems, interdependencies, changing requirements, these other costs are likely to grow, perhaps with emphasis on the costs of unreadiness and rigidity.
Looking back at the last few years, how did your enterprise fare with:
• Disruptions?
• Reduced capability?
• Consequences from unplanned events?
• Costs from rigidity?
• Costs from unreadiness?
• Lessons learned?
• Changes in strategy, technology, resources, process and, execution?
Are we ready for the next surprise? Any thoughts?
Going Nuclear
Last fall I experienced a nuclear stress test. It had nothing to do with power plants or the stress that the operators in Japan are undergoing. Mine was conducted by my cardiologist and the isotope was a means to gain transparency into my system under different conditions, conditions that evaluated my behavior in a dynamic environment. Happily, it rendered good news that rewarded the hundreds of miles and several of my treasured New Balance athletic shoes.
Over that last couple of years, we’ve highlighted the evidence and perspectives that our business world is increasingly more dynamic, interdependent, highly networked, dangerously complex, and managed by tools and traditions built on much more stable process experience. Business models and algorithms, control systems, enterprise tools and performance improvement technologies derived significant power from the likelihood that behavior repeat sufficiently to enable the power of statistics to improve decision making. I many cases, that stability and value remains and I expect that that will go on beyond any horizon I can conjure. In fact, Dr. Deming encouraged us to look at the world through the lens of Plan, Do, Check, and Act, and his truism remains eternal.
• When and how do we subject our enterprises to that PDCA?
• What is the nature of our Check activities?
• Do we get beyond “according to plan or budget”?
• What type of stress tests are we employing? How would our business continuity plans hold up?
• Are we evaluating what we operate against the assumptions we made when we developed our plans, processes, and systems?
• Are the experiences of the last three years is sufficient to justify a fresh look at our Check phase?
• What causes and effects do we think about today that were insignificant a few years back?
• Have we learned anything new about assumptions, risks, and opportunities? Do our enterprise systems, business processes, strategies and objectives reflect that learning?
• Who is asking the discomforting questions within our enterprises? What questions do our trusted advisors ask of us? What answers do they provide to our questions?
• Are yesterday’s data building today’s processes to deal with tomorrow’s problems? What change do we anticipate?
• How well do we currently change our capability in the face of adversity or new requirements? How far upstream do we analyze?
• Where do we sit on the fragility to agility scale?
• Do our metrics come from an odometer or a telescope?
“Events will take their course, it is no good of being angry at them; he is happiest who wisely turns them to the best account.” Bellerophon by Euripides 480-406 BC
Swan Lake and Nutcrackers
2010 was a year where much of our attention and anxiety were held captive by the oil spill in the Gulf of Mexico. It was a sobering reminder of our dependence on fuels that support our lifestyle, commerce, defense, and essentials to life today. Moratoriums on deep water drilling ensued followed by hearings and probes into why it happened and who we need to blame and subsequently seek a means of exacting some comforting justice. It’s been months since the topic has had front page coverage, almost forgotten much like the devastation and impacts of Katrina, the earthquakes in Haiti, China, and Chile.
Currently, the horrors precipitated by the earthquake and tsunami in Japan coupled with the political sea changes in the Middle East fill our front pages. In each of these cases, the parallel story on their impacts on our energy supply shares the spotlight. Events and actions that precipitate unpredictable instability are universally disturbing. We are not a species well wired for the unpredictable, much less so for the unthinkable. Our education is much about real or conjured patterns that explain the world and how it came to be as it is currently. The damage in Japan to the nuclear facilities is frightening and the consequences still very uncertain. They are not the result of irresponsible entities, commercial or governmental, but rather of our shared capacity to evaluate the unthinkable. Consequently, hordes of post mortem experts and pundits are ready to quickly make on the fly strategies about our energy future. The nuclear industry is at risk, sadly with a broad brush, and the media is all too happy to stoke the fires of panic.
I believe the fundamental issue remains unchanged. It is not about energy, or earthquakes, tsunamis, or accidents, or financial meltdowns. It is about our inadequate capacity to evaluate the unthinkable. Poor decisions are likely to follow, those borne in the heat of fear and politics. Some will want all the answers to questions that respond to the thinkable and consume valuable time and minds needed for the exploring of the unthinkable.
It’s time to reread “The Black Swan” by Nassim Nicholas Taleb (http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515).
While these frightening events are globe rattling and cascade to us all, similar issues may well be alive within our organizations, enterprises, and businesses.
• What is the process through which we evaluate important decisions?
• Do our plans follow well established patterns of business rules that we believe to be stable and reliable?
• Who addresses the unthinkable?
• How many high impact surprises have we observed in the last three years?
It’s something to think about. Thoughts?
Fuzzy Plans
“The most dangerous strategy is to jump a chasm in two leaps.” Benjamin Disraeli.
It’s October, and for many, this the month wherein our business plans go from aspirations to commitments and planned investments, or, what we will do and how much we will spend. It is at this juncture that many “stretch goals” are stretched out across time and spending with some promise of results and outcomes. In other words, we get money, people and kit in order to execute processes and projects for our enterprises. What are the probabilities that next year will be as we’ve planned? Well, how confident are we in our predictions and assumptions for next year? Does our plan plot out as a line over time?
One attribute of plans and budgets that I’ve frequently observed is the application of linearity, treating each month as a point on a line graph, not fuzzy at all. We feel fuzzy, but our system doesn’t want fuzzy as an input. How did we estimate or predict our planned inputs, processes, projects, and outputs? Reality is always fuzzy because randomness is such a big influence. When randomness is a part of multiple factors, it is a very safe bet to say that the plan and budget are not going to match a line.
There is one aspect of fuzziness in planning that can bite us. It has to do with the relationship between outcomes and consequences. Let’s assume that we have performance targets that we’ve committed to. These targets have measurable attributes that speak to time (cycle time and schedule), cost, and quality (defects and meeting requirements). Also, unless we’ve introduced some bias (made them bigger or smaller) due to timidity, overconfidence, bad math, or enforced optimism, our targets have some probability of being too high or too low. They have fuzzy, not certainty. Let’s assume for now that they have an equal probability of being higher or lower. What about the impact on the business if performance comes in higher or lower?
Often, the consequences of being late are far greater than the consequences of being early. Similarly, the consequences of spending less are not the same as the consequences of spending more. While the probabilities of an outcome might look like a familiar, like a normal bell curve, the consequences curve will not look anything like that. Multiplying likelihood by impact and then summing the values might well be a negative number. This is particularly true if we use historical data as a unit value to forecast future performance.
• Should we then introduce bias?
• What are the objectives of the plans and budgets?
• How do they affect what will happen?
• Are they static or dynamic instruments or tools?
• As time’s arrow moves ahead, does our view of the future shrink with what is left of the plan year or is the plan year always the next twelve months?
When is the Exam?
Ever been caught in a situation for which you were not prepared? Ever dream where you forgot to attend a certain class at school, did not go for months, and then remembered, and the exam was to be in one hour, forgot the room, hadn’t studied, and then … panic? It can be unnerving. It evokes a very special anxiety, an unforgettable sensation. This type of anxiety is different than a surprise calamity that came from nowhere and it was something you could not have prepared for. The anxiety that comes from being unprepared is different because the consequences are typically very severe, sometimes disastrous, but very possibly preventable, had we prepared for it or to be surprised. It is but one dimension of the cost of unreadiness. That cost of unreadiness is terrible, nightmarish, fraught with self doubt and remorse, and becomes overwhelming when it is basking in the public eye. Sometimes, others suffer because of our unreadiness.
Unreadiness has different faces; the most distinguishable differences often exist between those that serve the interest of shareholders and those that serve the interests of the public. There are events of unreadiness that are shared among sectors. One that is hard to escape is capturing our attention because it painfully highlights a frightening level of apparently ubiquitous unreadiness. One indicator of the issue is the overwhelming amount of rhetoric and buzzing about from spectators to visible execution from those jumping into the fight as ready and agile gladiators.
The current crisis with the river of oil gushing upward in the Gulf of Mexico is a behemoth that resists constraints and carries dimensions of destruction that will change economies, lives, careers, communities, and perhaps the lens through which we view ourselves. It behaves much as Pandora’s Box, opened and releasing unbridled and irreversible calamities. There are overlays of causes, inclusive of a stated strategy to reduce dependence on foreign oil, one that may have created or perpetuated cozy questionable regulatory behaviors with the offshore drilling permitting and oversight process. There will be plenty of time for blame to be delivered. Right now, however, it is a distraction from the priority plugging the spewing hell.
Plenty of pundits are weighing in with “who is in charge, which is guilty, how much should we punish ….” Yet the still small voices of, “we can help, we have experts, I will lead, follow me lads” can’t be heard or remain silent. When no one is ready, everyone is guilty. It comes back to the eternal conflict between decision making systems, values, paradigms between the world and rules of economics and the world ruled by the rules of variability, uncertainty, the laws of physics, today’s engineering, and yesterdays science. It is very much about yesterday’s science and yesterday’s patterns applied to tomorrow’s problems. We create black swans from white ones, by the decisions we make (might want to read the book … “The Black Swan” by Nassim Nicholas Taleb) and what we chose not to consider in those decisions.
David Brooks, the columnist, has articulated several times that extraction of energy resources (oil, gas and coal) continues to have costly risks, albeit acceptable by consumers so far. The laws of physics make that undeniable. The coal mine disaster, the current oil geyser, Somali pirates hijacking tankers, refinery fires; there are many. Yet, energy is essential to life as we want it to be and as we need it to become. Our current demand is not likely to drastically change anytime soon, but maybe our strategic objectives should. The 800 pound gorilla in the room is too big to avoid. What we are witnessing are the secondary effects of harvesting and extraction economies and technologies. All extraction and harvesting sources have to be converted and that process leaves scars. Whether lumber, pulp, agriculture, food, minerals, fuels, all leave scars.
So our gorilla wonders about our choices. Do we set the same standards across the choices? Do alternatives share the same decision hurdles? Do they share the same oversight and regulatory burdens? How does the consumption immediacy of today reconcile with tomorrow’s predictable constraints?
Consider one example. If oil and coal had to meet the yoke of regulation from cradle to grave that the nuclear generation alternative endures, we would have very different behaviors. Today, the cleanest and safest choice is treated like the red-headed stepchild, a behavior not shared by the rest of the technologically literate world. We unknowingly or passively take on the risks of oil spills and mining accidents, but howl at the thought of a geologically sound repository site for spent fuels and continue to foster an onerous permitting process for new generating facility construction. It’s a tough one to reconcile. Balancing the laws of economics with the laws of physics is tough enough, but when mixed with the laws of political electability, it can become next to impossible. This issue is more about tomorrow than about today.
But the nuclear debate did not get us Pandora’s Gusher, unreadiness did, cut corners did, questionable regulatory behavior and integrity did, poor situational awareness did, and maybe some hubris did. There seem to be some choices, and none are cheap, fewer easy. Raising the standards of readiness call for a different way to plan, manage, and reward. It means ensuring with preparedness and responsiveness rather than insuring with financial instruments and distributed risk coverage. The risks and consequences are radically different. Again, we can pick the laws of physics, build agility, and respond; or the laws of economics, acceptance of fragility, and react. There are differences between managing from fear or confidence.
The 800 pound gorilla wonders about how we will decide. When we have tough choices, do we seek affirmation or confrontation? What will be the costs of our unreadiness tomorrow?
“The art of war teaches us to rely not on the likelihood of the enemy’s not coming, but on our own readiness to receive him; not on the chance of his not attacking, but rather on the fact that we have made our position unassailable.” Sun Tzu
Thoughts?
A Gulf of Inconvenience
The oil well disaster events of the last weeks have been nothing short of ugly. In the background, the echoes of simplistic politicians ranting “Drill, baby, drill!” strike discordance with the fears and unavoidable harm playing out in the Gulf and spotlighted on the nightly news. Congressional hearings into the events are fraught with finger pointing at those called to testify and between those testifying with blame becoming the volleyball, destined to be set up, passed, and slammed until it hits a score. In the meantime, on-the-fly brainstorming is generating and testing ideas to stop the river of oil spewing from its lifelong imprisonment below the surface of the sea; and has rendered predictable disappointments. There are lots of spectators watching, pundits blasting, gladiators battling to survive the ordeal, and some hiding from repercussions.
In the ensuing panic and spotlight, another scary dimension reemerges, how ready are we to tackle what we have not experienced before? Executives of the drilling operations confess, in retrospect, inadequacies in the analysis, evaluation, and preparation for the failures leading to the explosion and the current river of oil. It is messy, the oil spill, the accompanying chaos, and the level of activity to assign blame from the bleachers and the court of public opinion. There is one huge problem with the court of public opinion; it is typically concerned with assigning retrospective blame and exacting a full measure of justice. Often that justice comes as punishment for the convicted and increased regulation for everyone else. On the other side of these events, we will have to contend with choices about getting less and paying more. I wonder what the real cost of our current energy enriched lifestyle might be? I believe we all may experience some level of repugnance and disapproval of these energy extraction accidents, indeed very ugly, but are they a dark side of the convenience we enjoy? These events could have certainly been less likely, with different choices by the operators, their leadership and our shopping demands.
I want to be safe and comfortable, living the convenience that energy provides, but may be reluctant to bear the total costs. I don’t believe that I am alone. An interesting aspect of this scenario is fundamental to situations many industries may be facing. Do we create strategies with aggressive goals that lead to optimistic planning and biases in risk analysis? How much does the business strategy influence the science of decision making? Specifically, how are the random surprises of the variability in Mother Nature considered? When Mother Nature does not want to behave according to plan, do we change tactics? Do we change with deliberation or desperation? After all, when any of us are running behind schedule, the rise in anxiety and fear of failure is inescapable! How then, are choices made? Where do we anchor our thinking and decision making? How far do we explore the expensive options that Mother Nature may present, particularly when behind schedule and sunken investments are climbing!
What happens often is the juxtaposition of goals and decisions driven by the laws of economics and the subsequent actions driven by the laws of physics. We run the business with an economic lens, but Mother Nature can only behave with the physics lens (we can add the other sciences like chemistry, mathematics, geology). Sometimes we have to guess about what Mother Nature is going to do, and we’ll be wrong to some degree, sometimes really wrong. It happens to most of us, but we don’t necessarily think about it when things are going well at the well. As this plays out, we will discover poor decisions and we may be tempted to assign sinister or evil behind them. Right or wrong, we will seek blame and justice. Ugly positioning, influence peddling, legal battles, insurance nightmares and extended stalling strategies await us … these are driven by the laws of economics.
I want to be careful and keep the broad brush of judgment put away. I believe that regulation will constrain future actions and better protect us from harm, at a price. I still wrestle with my, or our, lifestyle and business decisions against this backdrop. Do I have the right scale when I choose? So, what price are we willing to pay and what risks are we asking some to bear?
How wide is the gulf that separates our convenience?
“Destiny is no matter of chance. It is a matter of choice: It is not a thing to be waited for, it is a thing to be achieved.” William Jennings Bryan
Thoughts?
Seneca, Darwin, And The Flying Dinosaurs
“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Charles Darwin. It is very specific about who or what survives, yet the more significant message is the meaning that “if you are not responsive to change, you will not survive.” There is ample anthropological evidence providing insights into how the differences we see between peoples may have evolved. It becomes more fascinating when I see birds that share a common ancestor with dinosaurs. Much of the same applies to organizations, governments, cities, businesses, religions, and even management systems. Management systems contain the DNA and resources that define how an organization operates with the intent of thriving and surviving to thrive another day.
A stroll through business publications and historical data depicts behaviors that resemble evolutionary changes. Three important observations come to mind, interestingly evolutionary and fraught with nonlinearities:
- Survival comes from responsiveness to changing requirements
- Extinction comes from decay or disruption
- Decay makes us more susceptible to disruption
Responsiveness connotes action. Something around us changes and we change to take advantage of it or don’t change quickly enough and we become victims of it. We can’t always control what may be changing, nor can we predict them all. But we can always make a safe bet, that is, change is coming, always coming. Are we going to survive the changes? Can we increase our chances of surviving?
“Luck is when preparation meets opportunity” Seneca, mid-1st century AD.
I really like the way Seneca frames change as an opportunity. We have virtual evidence that change is afoot across incalculable dimensions. How we communicate and are connected or marginalized is different and accelerating in morphing. The winners and losers as measured by financial indicators display a huge transformation from economies that harvested resources and converted them in to durables (steel, coal, wood products, and automotive) to one that delivers service and convenience on a virtual plane. Who would have dreamed 50 years ago that giants like Microsoft and Apple would be major players while some giants, perhaps too rigid to adapt, became extinct or were devoured by a competitor or another hungry species?
I’m fascinated because the emergent behemoths have figured out how to redefine how convenience is delivered and value is created. Value has always been created by creating convenience, but the virtual world redefined what is possible. The world Thomas Friedman describes in “The World is Flat” is one where the interconnected web strips away some of the advantages the big and strong hoarded. As the early giants created a generation of convenience on the shoulders of the Industrial Revolution, the rigidity of the delivery systems, consumption of materials, and business management systems evolved into big and strong. Dinosaurs were big and strong too.
The last two years certainly met the standard of being a disruption, a mini ice age from a cataclysmic event. But the decay that preceded and followed it may likely claim more for the museums. Are we going to be lucky? If we’re good, how long does good last?
“There is opportunity in every storm”
A Tale of Two Tigers
“It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way.” So begins “A Tale of Two Cities” by Charles Dickens. Although a story replete with social commentary, it brings into focus the impacts of adversity, particularly on the elite and unprepared. Aristocracy meant respect and a special place in the eyes of many, perhaps leading to hubris, and hubris often led to disaster.
Our current tale is akin, perhaps “A Tale of Two Tigers”. The recent months have put the light on two icons of the modern world, a commercial aristocracy, Tiger Woods and Toyota. Both have demonstrated a level of performance superiority that has not only secured dominance as the standards for performance and quality, but have become idolized and revered as role models for industry. The Toyota brand has bred an image and reputation that placed their management system as near perfection in creating strategy, culture, and execution excellence, devoid of constraints, and in perfect harmony with customers and suppliers. Tiger Woods may well be the greatest golfer of all time whose incomparable agility on the golf course has led to corporate sponsorship inclusive of Rolex Watches and Accenture, the consulting giant, both seeking affinity with the image of high performance.
What got the two Tigers to the pinnacle may have left them unprepared for the calamities they are confronting today. Success and recognition are powerful narcotics for anyone or any enterprise. Success reinforces confidence and creates energy for increased initiative, spurs growth and breeds many followers. Success can sometimes make us believe that it comes from our special place in the order of things, earned through focus, discipline and follow-through. Success can make us believe that we are better. But does it prepare us for adversity? When all is well, how often do we think of the world otherwise? How often do we prepare for failure and how to deal with it?
This “Tale of Two Tigers” can be about any or all of us. The financial meltdown and experiences with the global economy of the last 18 months are not unlike the two tigers. Success led to confidence and some of it diverted into hubris, we followed in adulation with investments, and perhaps did not think about a need to prepare for the adversity that followed.
So let’s consider:
- What makes us successful?
- Does our success create a belief that we are good or perhaps that we’re lucky?
- What are our assumptions of what lies ahead? Will these new trees continue to grow to the sky?
- What book are we reading or writing about the “Way” to succeed?
- Are we investing in becoming better at what is making us winners today? Does that mean that tomorrow will be like today?
- In 1970 there were 35,000 tigers in the world. Today, fewer than 7,000 tigers are left. Why is that?
Why did the French build the Maginot Line? What is the difference between confidence and complacency? Defending Against Risks with Structures and Controls? Think Again!
Also: Toyota’s Headache and Tylenol and
Think About It!
Have you ever thought about how we think, particularly the kind that leads to decisions? What drives important decisions? How do we know if we made the “right one”? As we enter into the New Year, how will we decide how to navigate ourselves and our enterprises successfully?
How we approach this tends to fall into two major categories (with some dangerous variations within). First, there’s the type of thinking that comes from experience. We observe and experience, develop some pattern describing the experience and tuck it away for reference. When we believe we recognize the pattern, we pull that memory out and make some conclusion about what is in front of us. Some people can store lots more patterns than others, have longer memories and can capitalize from that. It’s called inductive thinking and people with “good” inductive thinking can market that as experience. Hiring practices validate that the marketplace places a positive value on that. Experience is not always good, nor is experience a sure bet, so some further prodding and poking is usually a good idea. There are some areas where inductive thinking can be very valuable, particularly when there is little time available for decision making. It is a subjective realm, nonetheless.
There is another kind of thinking that has to do with the world of math and data and science (real science, not the subjective pretenders…). It requires evidence that is measurable and leads to the quantitative practices where many people will reach the same conclusions when presented with the same data. This kind is deductive thinking and there are lots of professions and methodologies that are built upon deductive thinking. It’s very powerful, learnable and very scalable. It too has limitations in that the person who engages in deductive thinking must learn how to do it correctly and not all of us learn or remember well. Experience here is important insofar as we can use it to demonstrate competence in the applications of the rules and tools. It is supposed to be the objective realm, subject to our ability to measure correctly. Memory also plays a role here. I would be challenged to apply much of what I learned in engineering school decades ago with any confidence.
Variations of the two types of thinking, comingling, and the influences of biases are always at play, so certainty or absolute correctness is elusive. There is however a dangerous type of thinking we may all be subject to. It’s called wishful thinking. We know it well and if we are practitioners in it, we now it’s capability to disappoint. We bring to bear what we have in deductive and inductive capabilities and we put the right bit of optimism and conjure really great scenarios. Sometimes wishful thinking blinds us to lots of really good inductive signals and deductive facts along the way. Some misapply the meaning of positive thinking to the process and don’t survive to tell about it.
So what is the right mix for the upcoming year? We know that there has been a lot of change amiss. The financial rules of engagement have been rattled by poor inductive, pseudo-deductive and far too much wishful thinking so as to create a fair bit of timidity. The way we are interconnected and interdependent in a multi-polar world present us with new data and rules as to what may or may not work. So how do we decide?
- Are we planning for a good year? Why so? Why not?
- Is uncertainty scary or energizing?
- What opportunities does a new playing field present?
- What do we induce, deduce or wish for 2010.
Happy New Year and Good Hunting!
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